Question 1

Paper dollars

Accepted Answer

A)  are commodity money and gold coins are fiat money. 
B)  are fiat money and gold coins are commodity money. 
C)  and gold coins are both commodity monies. 
D)  and gold coins are both fiat monies. 
A)  are commodity money and gold coins are fiat money. 
B)  are fiat money and gold coins are commodity money. 
C)  and gold coins are both commodity monies. 
D)  and gold coins are both fiat monies.

Question 2

The set of items that serve as media of exchange clearly includes

Accepted Answer

A)  demand deposits. 
B)  short-term bonds. 
C)  credit cards. 
D)  All of the above are correct. 
A)  demand deposits. 
B)  short-term bonds. 
C)  credit cards. 
D)  All of the above are correct.

Question 3

Which of the following is an example of barter?

Accepted Answer

A)  A parent gives a teenager a $10 bill in exchange for her babysitting services. 
B)  A homeowner gives an exterminator a check for $50 in exchange for extermination services. 
C)  A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet. 
D)  All of the above are examples of barter. 
A)  A parent gives a teenager a $10 bill in exchange for her babysitting services. 
B)  A homeowner gives an exterminator a check for $50 in exchange for extermination services. 
C)  A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet. 
D)  All of the above are examples of barter.

Question 4

Which of the following can banks use to borrow from the Federal Reserve?

Accepted Answer

A)  the discount window or the term auction facility 
B)  the discount window but not the term auction facility 
C)  the term auction facility but not the discount window 
D)  Banks cannot borrow from the Federal Reserve, only the government can. 
A)  the discount window or the term auction facility 
B)  the discount window but not the term auction facility 
C)  the term auction facility but not the discount window 
D)  Banks cannot borrow from the Federal Reserve, only the government can.

Question 5

In a system of 100-percent-reserve banking,

Accepted Answer

A)  banks do not make loans. 
B)  currency is the only form of money. 
C)  deposits are banks' only assets. 
D)  All of the above are correct. 
A)  banks do not make loans. 
B)  currency is the only form of money. 
C)  deposits are banks' only assets. 
D)  All of the above are correct.

Question 6

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 7

The "yardstick" people use to post prices and record debts is called

Accepted Answer

A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  liquidity. 
A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  liquidity.

Question 8

The money multiplier equals

Accepted Answer

A)  1/R, where R represents the quantity of reserves in the economy. 
B)  1/R, where R represents the reserve ratio for all banks in the economy. 
C)  1/(1+R), where R represents the quantity of reserves in the economy. 
D)  1/(1+R), where R represents the reserve ratio for all banks in the economy. 
A)  1/R, where R represents the quantity of reserves in the economy. 
B)  1/R, where R represents the reserve ratio for all banks in the economy. 
C)  1/(1+R), where R represents the quantity of reserves in the economy. 
D)  1/(1+R), where R represents the reserve ratio for all banks in the economy.

Question 9

If the reserve ratio is 4 percent, then the money multiplier is

Accepted Answer

A)  24. 
A)  25. 
B)  26. 
C)  4. 
A)  24. 
A)  25. 
B)  26. 
C)  4.

Question 10

The members of the Federal Reserve's Board of Governors

Accepted Answer

A)  are elected to office by the public every fourteen years. 
B)  are nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives. 
C)  are elected by bankers in each Federal Reserve Region. 
D)  are appointed by the president of the U.S. and confirmed by the U.S. Senate. 
A)  are elected to office by the public every fourteen years. 
B)  are nominated by the U.S. Senate banking committee and confirmed by the U.S. house of representatives. 
C)  are elected by bankers in each Federal Reserve Region. 
D)  are appointed by the president of the U.S. and confirmed by the U.S. Senate.

Question 11

Which of the following both increase the money supply?

Accepted Answer

A)  an increase in the discount rate and an increase in the interest rate on reserves 
B)  an increase in the discount rate and a decrease in the interest rate on reserves 
C)  a decrease in the discount rate and an increase in the interest rate on reserves 
D)  a decrease in the discount rate and a decrease in the interest rate on reserves 
A)  an increase in the discount rate and an increase in the interest rate on reserves 
B)  an increase in the discount rate and a decrease in the interest rate on reserves 
C)  a decrease in the discount rate and an increase in the interest rate on reserves 
D)  a decrease in the discount rate and a decrease in the interest rate on reserves

Question 12

Which of the following might explain why the United States has so much currency per person?

Accepted Answer

A)  U.S. citizens are holding a lot of foreign currency. 
B)  Currency may be a preferable store of wealth for criminals. 
C)  People use credit and debit cards more frequently. 
D)  All of the above help explain the abundance of currency. 
A)  U.S. citizens are holding a lot of foreign currency. 
B)  Currency may be a preferable store of wealth for criminals. 
C)  People use credit and debit cards more frequently. 
D)  All of the above help explain the abundance of currency.

Question 13

As opposed to a payments system based on barter, a payments system based on money

Accepted Answer

A)  requires a double coincidence of wants. 
B)  leads to less specialization. 
C)  makes trades less costly. 
D)  None of the above is correct. 
A)  requires a double coincidence of wants. 
B)  leads to less specialization. 
C)  makes trades less costly. 
D)  None of the above is correct.

Question 14

The existence of money makes trade easier. How is it that money can also increase the standard of living?

Accepted Answer

The existence of money means the economy

Question 15

What makes the New York Federal Reserve regional bank so important?

Accepted Answer

The president of the New York Federal Re

Question 16

If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank

Accepted Answer

A)  must increase its required reserves by $10. 
B)  will initially see its total reserves increase by $10.50. 
C)  will be able to make new loans up to a maximum of $9.50. 
D)  All of the above are correct. 
A)  must increase its required reserves by $10. 
B)  will initially see its total reserves increase by $10.50. 
C)  will be able to make new loans up to a maximum of $9.50. 
D)  All of the above are correct.

Question 17

In an economy that relies upon barter,

Accepted Answer

A)  trade does not require a double coincidence of wants. 
B)  scarce resources are allocated just as easily as they are in economies that do not rely upon barter. 
C)  there is no item in the economy that is widely accepted in exchange for goods and services. 
D)  All of the above are correct. 
A)  trade does not require a double coincidence of wants. 
B)  scarce resources are allocated just as easily as they are in economies that do not rely upon barter. 
C)  there is no item in the economy that is widely accepted in exchange for goods and services. 
D)  All of the above are correct.

Question 18

Monetary policy is made by the .

Accepted Answer

Federal Op

Question 19

Which of the following is a store of value?

Accepted Answer

A)  cash and stocks 
B)  cash but not stocks 
C)  stocks but not cash 
D)  neither cash nor stocks 
A)  cash and stocks 
B)  cash but not stocks 
C)  stocks but not cash 
D)  neither cash nor stocks

Question 20

First National Bank (FNB) has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000. If FNB receives an additional deposit of $100,

Accepted Answer

A)  then it has required reserves of $210 and holds excess reserves of $10. 
B)  then it has required reserves of $10 and holds excess reserves of $20. 
C)  then it has required reserves of $110 and holds excess reserves of $190. 
D)  then it has required reserves of $110 and holds excess reserves of $0. 
A)  then it has required reserves of $210 and holds excess reserves of $10. 
B)  then it has required reserves of $10 and holds excess reserves of $20. 
C)  then it has required reserves of $110 and holds excess reserves of $190. 
D)  then it has required reserves of $110 and holds excess reserves of $0.

Exam 29: The Monetary System

Paper dollars

The set of items that serve as media of exchange clearly includes

Which of the following is an example of barter?

Which of the following can banks use to borrow from the Federal Reserve?

In a system of 100-percent-reserve banking,

Sandra routinely uses currency to purchase her groceries. She is using money as a medium of exchange.

The "yardstick" people use to post prices and record debts is called

The money multiplier equals

If the reserve ratio is 4 percent, then the money multiplier is A) 24.

The members of the Federal Reserve's Board of Governors

Which of the following both increase the money supply?

Which of the following might explain why the United States has so much currency per person?

As opposed to a payments system based on barter, a payments system based on money

The existence of money makes trade easier. How is it that money can also increase the standard of living?

What makes the New York Federal Reserve regional bank so important?

If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank

In an economy that relies upon barter,

Monetary policy is made by the .

Which of the following is a store of value?

First National Bank (FNB) has a reserve ratio of 20 percent, a required reserve ratio of 10 percent, and deposits of $1,000. If FNB receives an additional deposit of $100,

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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